House passes bill with limits on gambling-loss offsets; industry will seek change before implementation

The approval on Thursday in the U.S. House of Representatives of a massive tax and spending bill that includes a provision limiting gambling-loss offsets may not be as much of a disaster for horse racing and other gambling companies as it appears.

The provision, which would limit the offset to 90 percent of a gambler’s winnings and potentially have a devastating impact on professional bettors, was snuck into the Senate version of the bill just hours prior to the bill passing in that chamber on Tuesday without the knowledge of racing or gambling lobbyists, according to officials. The House passed that version of the bill on Thursday after a marathon session of arm-twisting by Republican leaders and threats from President Donald Trump.

While the change in tax policy seems ominous, it’s helpful to consider what was happening in the Senate on Monday and Tuesday as Republicans in the chamber built enough support for the legislation to get Vice President J.D. Vance to cast the deciding vote. Prior to that point, Republicans who refused to support the bill were all critical of the massive increase to the U.S. debt that the legislation would create, so legislative staffers were searching for ways to lower the bill’s “score,” a term referring to the long-term cost of the bill’s provisions.

One way to do that is to find new revenue wherever you can. For the change to the tax policy on gambling offsets, Congressional budgeters came up with a number of $1.1 billion over 10 years. While that may not be much in the grand scheme of trillions of dollars in spending cuts, a number of other small changes also were added to the bill. It all adds up, at least for fiscal-hawk Republican legislators who were looking for political cover for supporting a bill that blows up the deficit for years to come.

Under the new policy, offsets to gambling losses will be limited to 90 percent of gambling winnings, rather than the decades-long policy of allowing offsets up to 100 percent of winnings. So if a gambler has $100,000 of winnings but losses equal to or in excess of that amount, the offset will now be limited to $90,000, and the bettor will pay taxes on $10,000 in winnings, even if the gambler had a net loss for the year.

But here’s the catch. The new tax policy will not go into effect until the 2026 tax year, or for filers in 2027. That gives legislators roughly 18 months to reverse the policy. And because the provision was added solely to lower the bill’s score for the purpose of getting the votes that took place this week, it’s likely that the provision gets quietly erased when there’s far less attention on tax and spending next year.

Tom Rooney, chief executive officer of the National Thoroughbred Racing Association and a former four-term Republican Congressman, hinted at this possibility in an interview Wednesday, when Republican support had not yet coalesced behind the bill.

“If the bill passes [the offset limit] is not going to go into effect right away,” Rooney said. “The only thing we may be able to do is work with our colleagues on the Hill on a way to move forward that doesn’t hurt us.”

The potential change in tax policy has brought broad criticism from gamblers and gambling companies across the United States, so there’s likely to be a wide coalition of lobbyists pushing for the provision to be changed next year. Racing lobbyists will be among that coalition.

So, in short, gamblers should rightfully be alarmed at such a frivolous political ploy to give legislators cover for supporting legislation that runs squarely against their stated principles. But they shouldn’t panic just yet. Nothing in Washington these days can’t be undone.

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